Decentralized finance (DeFi) has been one of the most innovative and lucrative sectors in the crypto space, but also one of the most vulnerable to attacks. In 2023, hackers managed to exploit several DeFi protocols and steal millions of dollars’ worth of crypto assets. Here are the five biggest DeFi hacks of the year and what we can learn from them.
BadgerDAO: $120 million
BadgerDAO is a DeFi protocol that aims to build products and infrastructure for Bitcoin on Ethereum. In January 2023, a sophisticated attacker exploited a flaw in the protocol’s smart contracts and drained $120 million worth of wrapped Bitcoin (WBTC) and other tokens from the platform.
The hacker used a flash loan to manipulate the prices of the tokens and siphon funds from the vaults. The BadgerDAO team said they were working with security experts and law enforcement to recover the funds and identify the attacker.
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Cream Finance: $100 million
Cream Finance is a DeFi lending platform that allows users to borrow and lend various crypto assets. In February 2023, a hacker exploited a bug in the protocol’s integration with Yearn Finance, another DeFi platform, and stole $100 million worth of tokens from the platform.
The hacker used a flash loan to create a large amount of debt and then liquidated it at a favorable rate. The Cream Finance team said they were investigating the incident and working on a compensation plan for the affected users.
SushiSwap: $80 million
SushiSwap is a DeFi exchange that allows users to swap and provide liquidity for different crypto tokens. In March 2023, a hacker exploited a vulnerability in the protocol’s MISO launchpad, which is used to launch new tokens on the platform. The hacker was able to mint an unlimited amount of SUSHI tokens and sell them on the market, causing the price to plummet.
The hacker also stole $80 million worth of ETH and other tokens from the launchpad. The SushiSwap team said they were working on a post-mortem report and a recovery plan for the platform.
Alpha Finance: $50 million
Alpha Finance is a DeFi platform that offers various products such as lending, borrowing, leveraged yield farming, and stablecoins. In April 2023, a hacker exploited a flaw in the protocol’s Alpha Homora product, which allows users to leverage their positions in yield farming.
The hacker used a flash loan to borrow a large amount of ETH and then used it to manipulate the prices of the tokens on Alpha Homora and Uniswap, another DeFi exchange.
The hacker then withdrew $50 million worth of ETH and other tokens from the platform. The Alpha Finance team said they were working with security auditors and other DeFi protocols to mitigate the impact and prevent future attacks.
Compound: $40 million
Compound is one of the oldest and most popular DeFi platforms that allows users to earn interest on their crypto assets by lending and borrowing them. In May 2023, a hacker exploited a bug in the protocol’s oracle system, which is used to provide accurate price data for the platform. The hacker was able to manipulate the prices of some tokens on Compound and cause them to deviate from their market values.
The hacker then borrowed these tokens at a low rate and sold them on the market at a high rate, making $40 million worth of profit. The Compound team said they were fixing the bug and working on a compensation plan for the affected users.
These are just some of the major DeFi hacks that occurred in 2023, but there were many more smaller incidents that also caused significant losses for users and platforms. These hacks show that DeFi is still an emerging and experimental field that requires constant vigilance and security audits.
Users should always do their own research before investing in any DeFi protocol and be aware of the risks involved. DeFi has great potential to revolutionize finance, but it also comes with great challenges and dangers.